Nigeria is seeking more private and international capital for gas infrastructure as it looks to address a funding shortfall that officials say is limiting the development of Nigeria’s large gas reserves.

Speaking at the West African Refined Fuels Market Conference in Abuja, Executive Director of the Midstream and Downstream Gas Infrastructure Fund (MDGIF), Oluwole Adama, said Nigeria had more than 200 trillion cubic feet of proven gas reserves, with some estimates putting the country’s total reserves as high as 600 trillion cubic feet.

He said a study had estimated that about US$20 billion would be required annually for 10 years to address the country’s gas infrastructure deficit.

The MDGIF, established under the Petroleum Industry Act 2021, is expected to help reduce investment risks in gas infrastructure and attract additional private capital to projects that require significant upfront funding.

Adama said the sector needed what he described as “patient capital” to make projects that may be difficult to finance through conventional lending more viable for private investors.

He said the Fund had reached final investment decisions on 31 projects since its board was constituted and supported the construction of more than 200 pieces of infrastructure over the past 18 months, with 10 already commissioned.

According to him, between six and eight gas processing plants, alongside dozens of associated facilities, are expected to come on stream between October and December.

Adama said the Fund was targeting a multiplier effect from its investments, estimating that every naira committed by the MDGIF could attract about three naira in additional private capital.

The Fund is also pursuing international financing arrangements. Adama said a syndication agreement of up to US$500 million had been reached with partners at an African finance conference last August, with two projects already funded and three others in the pipeline.

He said one of the difficulties facing foreign investors was assessing the equity risks associated with Nigerian gas projects before committing capital, adding that the MDGIF’s role included helping to reduce some of those risks.

A representative of a global credit ratings agency at the conference said data on infrastructure defaults compiled by multilateral lenders showed that African infrastructure projects had historically recorded lower credit losses than comparable projects in other emerging markets.

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The representative said the data could provide additional information for investors assessing infrastructure projects on the continent.

Financing costs remain another issue for the sector.

Executive Director of Finance and Accounts at the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Abiodun Adeniji, said the planned African Energy Bank, expected to launch before the end of the year, could provide another source of financing for energy projects.

He said the bank was expected to offer lending rates closer to those available in mature markets such as Norway, the United States and the United Kingdom, compared with the double-digit rates often available from Nigerian commercial banks.

Adeniji said adequate funding for the MDGIF would be important to its ability to provide equity for gas infrastructure projects.

He also identified currency volatility, foreign exchange constraints and community-related delays as factors that could affect project development and investor decisions.

The financing challenge comes as Nigeria seeks to expand the infrastructure needed to process and transport its gas resources.

Closing the gap will require funding from several sources, including government-backed initiatives, commercial lenders, development finance institutions and private investors.

For now, officials are looking to increase the role of the MDGIF in bringing those sources of capital together, while projects already in development move towards completion.

Meiza Nigeria